Unesterified sterol modulates the function of eukaryotic membranes. In human cells, sterol is esterified to a storage form by acyl-coenzyme A (CoA) : cholesterol acyl transferase (ACAT). Here, two genes are identified, ARE1 and ARE2, that encode ACAT-related enzymes in yeast. The yeast enzymes are 49 percent identical to each other and exhibit 23 percent identity to human ACAT. Deletion of ARE2 reduced sterol ester levels to approximately 25 percent of normal levels, whereas disruption of ARE1 did not affect sterol ester biosynthesis. Deletion of both genes resulted in a viable cell with undetectable esterified sterol. Measurements of [C-14]acetate incorporation into saponified lipids indicated down-regulation of sterol biosynthesis in the are1 are2 mutant cells. With the use of a consensus sequence to the yeast and human genes, an additional member of the ACAT gene family was identified in humans.